Tuesday, June 14, 2005

Markets and pessimists

As there are usually two or more explanations for almost anything, it is interesting to look at how commentators divide on the surprisingly low long-term interest rates.

Some (pessimists and left-leaning commentators) see a signal of an economic downturn.

Others (optimists and others, including Greenspan himself) see price pressures from increased global competition.

As if on signal, these three events were reported in rapid succession over the weekend (sorry, links cannot be attached from this computer in Old Europe): i) Toyota announced plans for price increases and suggested that this will give GM an opening to raise prices; ii) the U.S. Justice Department made plain their suspicions of possible price fixing in the auto industry; iii) GM announced plans for lower new-car prices.

Stay tuned but in matters of markets, better to be optimistic.